Kuwait has cut selling prices of diesel and kerosene at filling stations after political opposition to price hikes underlined the difficulty of reforming the country’s welfare system, even as the loss of oil revenues makes reform more urgent.On Jan 1, the government raised the price of diesel at wholesalers and filling stations to 0.170 dinar (59 US cents) per litre from 0.055 dinar. Kerosene prices also increased The changes aimed to reduce the burden of lavish subsidies on state finances. State news agency KUNA estimated that diesel price reform would save the government around $1 billion a year.

Although the new prices of diesel and kerosene were still among the lowest in the world, the politically sensitive decision prompted heavy criticism of government policy by some members of parliament, who argued it was unfair to consumers.

On Wednesday, state refiner Kuwait National Petroleum Co (KNPC) cut diesel and kerosene prices back to 0.110 dinar, effective from Feb 1, KUNA reported. It quoted KNPC spokesman Khalid al- Asousi as saying that from now on, domestic prices of the fuels would be reviewed monthly according to developments in the global markets. KNPC will continue to supply certain parties, including those with very large demand for the fuels, at the old, subsidised price of 0.055 dinar, he said.

Cutting subsidies has become more important for Kuwait’s government with the plunge in global oil prices, which has slashed state export revenues. Earlier this week, the finance ministry projected a budget deficit of 8.23 billion dinars for the next fiscal year starting in April. After the controversy over the diesel subsidy reform, Oil Minister Ali al- Omair said early this month that the government had decided to postpone any removal of subsidies from petrol, electricity and water. He did not say when authorities might resume considering the reforms.